Compute optimal stopping in a die-rolling game

Quick Overview

This question evaluates a candidate's grasp of optimal stopping theory, expected value computation, and finite-horizon decision-making under uncertainty, including recognition of threshold-based policies and backward-induction reasoning relevant to data scientist roles.

Compute optimal stopping in a die-rolling game

Company: Capital One

Role: Data Scientist

Category: Statistics & Math

Difficulty: medium

Interview Round: Technical Screen

Consider three sequential die-rolling games with a fair six-sided die (pips 1–6). You may observe each roll and decide whether to stop and take the shown value in dollars. If you have not stopped before the last allowed roll, you must take the last roll’s value. Game A: Up to three rolls, no costs. Find the optimal stopping policy and exact expected payoff. Game B: Up to three rolls; if you choose to continue after roll 1 or roll 2, you must pay $1 before rolling again (each continuation costs $1). Find the optimal stopping thresholds and exact expected payoff. Game C: Up to three rolls; the second and third rolls each require paying $1 to roll (i.e., you always pay $1 to access roll 2 if you continue from roll 1, and another $1 to access roll 3 if you continue from roll 2). Find the optimal policy and expected payoff. Bonus: Generalize Game B to an n-sided die with faces 1..n and a continuation cost c; derive the stopping threshold(s) as a function of n and c.

Quick Answer: This question evaluates a candidate's grasp of optimal stopping theory, expected value computation, and finite-horizon decision-making under uncertainty, including recognition of threshold-based policies and backward-induction reasoning relevant to data scientist roles.

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Oct 13, 2025, 9:49 PM
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Optimal stopping with a fair die (3-roll horizon)

You observe outcomes of fair six-sided die rolls (faces 1–6) and may stop after any roll to take the shown value in dollars. If you have not stopped before the final allowed roll, you must take the last roll’s value. Use backward induction to find the optimal policy and expected payoff for each game.

Assumptions:

  • The die is fair (each face has probability 1/6).
  • You observe each roll before deciding whether to stop.
  • Where a fee applies, it is paid immediately before taking the next roll (only if you choose to continue).

Game A (no costs)

  • Up to three rolls; no fees to continue.
  • Find the optimal stopping rule at each roll and the exact expected payoff.

Game B (optional continuation cost)

  • Up to three rolls; if you choose to continue after roll 1 or roll 2, you must pay 1beforethenextroll(eachcontinuationcosts1 before the next roll (each continuation costs 1).
  • Find the optimal stopping thresholds (by face value) and the exact expected payoff.

Game C (per-roll access fee)

  • Up to three rolls; the second and third rolls each require paying 1toroll(i.e.,ifyoucontinuefromroll1youpay1 to roll (i.e., if you continue from roll 1 you pay 1 to access roll 2, and if you continue from roll 2 you pay $1 to access roll 3).
  • Find the optimal policy and expected payoff.

Bonus (generalization)

  • Generalize Game B to an n-sided die with faces {1, 2, …, n} and a continuation cost c each time you choose to roll again (up to three rolls total). Derive the stopping thresholds at roll 1 and roll 2 as functions of n and c.
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